PNJ continues to want to expand its network and increase market share.
PNJ currently holds 55% of the branded jewelry market share with mid- to high-end customers. In 2023, the company will open 36 new stores, mainly in the Central and Northern provinces, as many competitors are narrowing their networks. As of August 31, 2024, the company has 414 stores in 57 provinces and cities. In the first 8 months of 2024 alone, PNJ opened 24 new stores and closed 10 stores.
From PNJ's move to expand its store network, ABS Securities (ABS Research) commented: "We forecast PNJ's revenue to grow by 10.5% and decrease by 6.8% in 2024 and 2025, respectively." This unit gave a positive recommendation thanks to a number of factors. In particular, PNJ wants to increase its market share by continuing to expand its store network, with the expected number of new stores opened in each of 2024 and 2025 being 25 stores.
PNJ has plans to expand its store system and enhance brand awareness in the North and North Central regions, which are the regions that maintain the best purchasing power among the three regions with a new customer base of young people. PNJ's system expansion is expected to boost retail sales growth in the coming months and gain more market share from small jewelry stores thanks to the trend of preferring branded jewelry.
At the same time, ABS Research forecasts that the jewelry retail and wholesale market will improve in September and in the fourth quarter of 2024 thanks to the beginning of the peak wedding season, jewelry consumption demand will increase and wholesale customers will prepare goods for the upcoming Lunar New Year.
Difficulty due to lack of raw materials
However, ABS Research also warned of risks in store opening speed and average revenue/store not being as expected, people's income growth not being as expected and raw gold supply not improving.
The shortage of raw materials for production will be the main factor causing PNJ's revenue in 2025 to decrease.
As of the end of the second quarter of 2024, PNJ's inventory accounted for 75% of the company's asset structure, reaching VND9,754 billion, down 11.2% compared to the beginning of the year. In the inventory structure, this decrease mainly came from raw materials with a sharp decrease of 68.2% compared to the beginning of the year, and finished product inventory decreased by 9.7% compared to the beginning of the year.
ABS Research analyzed: “Unlike other businesses in the retail industry, PNJ's raw materials are mainly gold with strong price fluctuations, so PNJ needs to store a lot of inventory to avoid the risk of strong fluctuations in cost of goods sold.
In addition, PNJ controls the entire jewelry business process from raw material import, manufacturing, distribution, etc., so the time the company stores raw materials and finished products will be longer, making PNJ's inventory turnover much lower than other retail companies that only focus on distribution.
PNJ's main sources of raw materials for production are raw gold, raw silver, gold bars, gemstones, diamonds, etc. These raw materials are mainly imported from abroad, the rest are still purchased domestically.
The instability of the world economy has pushed the world gold price in particular and the price of precious metals in general to increase sharply since the beginning of 2024. The high gold price causes the price of input materials to increase, PNJ will have to increase the selling price. This can affect the demand for jewelry as well as reduce the profit margin of the product.
Right from the beginning of the year, facing the strong increase in world and domestic gold prices, high exchange rates and people's tendency to hoard gold, the Chairman of the Board of Directors of PNJ pointed out the difficulties in finding quality raw materials when domestic supply was limited and businesses were still not allowed to import gold, and the company could even have to close production for a few days when there was not enough raw materials.
Therefore, if the raw material situation does not improve, it is possible that the company will not have enough raw materials to produce to meet demand in the coming time.
